Who should pay for ESG ratings?

Stefano Lovo, Jacques Olivier and Christophe Bisiere ()
Additional contact information
Stefano Lovo: HEC Paris - Ecole des Hautes Etudes Commerciales
Jacques Olivier: HEC Paris - Ecole des Hautes Etudes Commerciales

Working Papers from HAL

Abstract: We model how a profit-maximizing agency decides whether to sell ESG ratings to issuers or investors. For firms in sufficiently green sectors or when the proportion of socially responsible investors is large enough, ESG ratings increase expected stock prices and the "issuer pays" business model is more profitable than "investors pay". When all investors are socially responsible, the model coincides with a model of credit ratings, explaining why credit ratings are sold to issuers while most ESG ratings are sold to investors. Ratings boost equilibrium investment in ESG but their impact on welfare is ambiguous, even for socially responsible investors.

Keywords: ESG; Rating agencies; Investors pay; Issuer pays; emission abatement; incentives; responsible investors (search for similar items in EconPapers)
Date: 2025-02-25
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05187037

DOI: 10.2139/ssrn.5106010

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().